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  • richard evans

USD higher on more hawkish talk

Good morning

US dollar pushes higher, and US 10 year yields hit 2.6%, demand partly from safe haven buying but also from hawkish comments from Fed officials, this time it was Brainard, usually dovish, who made it clear the Ukraine crisis skews inflation risks to the upside and Feds George who said 50bps rise in May is absolutely a possibility. The dollar was higher against EUR, with EURUSD trading down to 1.0875 this morning, while GBPUSD touched 1.3045. Both a little off those lows as I type.

GBP very slightly higher against the single currency, EURGBP at 0.8335 (GBPEUR 1.1995). EUR wasn’t really helped by a suggestion from ECBs Wunsch that they could raise rates to zero this year given the inflation target is essentially met.

The recent optimism over a possible end to the Ukraine invasion looks very misplaced unfortunately. While more evidence of atrocities are uncovered, further sanctions are set to be announced today on Russia. Russia continues to attack Mariupol, as you know I think this is the key for Russia. US, UK and Australia have agreed to work together on new weapons such as hypersonic missiles and defence systems to combat such weapons.

The lockdown in Shanghai is continuing, and will remain in place until everyone there has been tested. Real concerns that further lockdowns in China could damage an already battered supply process and push inflation higher still.

FOMC minutes later today may shed some light on rates thinking for May and also perhaps some details on their plans for balance sheet reduction. Otherwise the calendar is sees a few central bank speakers.

Its another miserable start to the day weather-wise, hopefully things will clear up a little later in the day and for the rest of the week. Some decent weather over the holidays would be appreciated!

- 10.00 ECBs Panetta speaks

- 10.00 EU PPI

- 11.45 ECBs Lane speaks

- 13.15 BoEs Pill speaks

- 15.00 CAD Ivey PMI

- 19.00 FOMC minutes

- 02.30 AUS trade balance

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